The system created inefficiencies and largely benefited those that didn’t really need the support in high income earners.

In the years before the liberalization of energy prices, the local growth of domestic demand for diesel in Saudi Arabia was one of the highest in the world, growing at an irrational pace that did not reflect real demand coming from residents.

One of the reasons for such rapid growth was the smuggling of the subsidized fuel abroad to take advantage of the huge price differentials.

In order to tackle this problem it was necessary to gradually remove subsidies from retail fuel prices and to bring those prices nearer to those prevailing in other Arabian Gulf countries — thus removing the commercial incentive to smuggle fuel across borders.

It was a significant step change in thinking and signaled the dawn of a new energy era for the Kingdom.

The removal of fuel subsidies that started at the beginning of 2018 came as an important first step in the path of economic reform of fuel pricing. It has helped to create a more sustainable path as well as opening up domestic competition.

Since the removal of the subsidies fuel demand has been rising at its slowest pace in a decade, which shows what an artificial market it was before.

In the meantime, the Citizen’s Account has helped to create support where it is needed without creating the distortions that were inherent in the subsidy system, because it allows for the price movements when calculating how much support is distributed to where it is needed most.

• Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq

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